How do you justify using a “constant dollar” cash flow analysis when inflation over the period covered in your “constant dollar” cash flow analysis is as good as guaranteed
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How do you justify using a “constant dollar” cash flow analysis when inflation over the period covered in your “constant dollar” cash flow analysis is as good as guaranteed
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- Why is it true, in general, that a failure to adjust expected cash flows for expected inflation biases the calculated NPV downward?Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?A. InterestB. Inflation C. Risk of failure to receive expected cash inflows D. Historic costIf you disounted a set of positive real cash flows with a nominal discount rate and inflation were posotive, you would _______ the present value of those cash flows
- Logan is conducting an economic evaluation under inflation using the then-current approach. If the inflation rate is j and the real time value of money rate is d, which of the following is the interest rate he should use for discounting the cash flows? a. j b. d c. j + d d. j + d + dj.Which of the following statements correctly describe how the present value of a future expected cash flow may vary with different factors? Group of answer choices A. More than one of the other options are correct. B. As the expected loss of purchasing power due to inflation increases, then, holding all else constant, the present value of a future expected cash flow will decrease. C. As the period of time we have to wait until we receive a future expected cash flow decreases, then, holding all else constant, the present value of the cash flow will decrease. D. As the risk associated with a future expected cash flow increases, then, holding all else constant, the present value of the cash flow will increase.The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. A. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The inflation rate indicating the change in average prices The duration of the investment (N) The interest rate (I) that could be earned by invested funds The present value (PV) of the amount invested B. Investments and loans base their interest calculations on one of two possible methods: the interest and the. interest methods. Both methods apply three variables—the amount of principal, the interest rate, and the investment or deposit period—to the amount deposited or invested in order to compute…
- Consider the accompanying cash flow series at varying interest rates. What is the equivalent present worth of the cash flow series? (a) P = $5,068(b) P = $4,442(c) P = $4.745(d) P = $3.833The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The duration of the investment (N) The inflation rate indicating the change in average prices The present value (PV) of the amount invested The interest rate (I) that could be earned by invested fundsIf the inflation rate is positive, the expected NPV of an investment will be: A.understated if real cashflows are discounted by the nominal discount rate. B. understated if nominal cashflows are discounted by the nominal discount rate. C. overstated if the real cashflows are discounted by the nominal discount rate. D. understated if the nominal cashflows are discounted by the real discount rate.
- Determine the present equivalent value of the cash-flow diagram of the shown figure, when the annual interest rate, ik, varies as indicated.What is Internal Rate of Return - Monthly Fixed Cash Flows with Reversions? Please provide examples.,Match the following terms with the appropriate definition.Effective yield or interest rateMonetary liabilityCompound interestPresent ValueFuture value of a single amountA.Fixed obligation to pay an amount in cash.B.The rate at which money will actually grow.C.Interest accumulates on interest.D.Current worth of future cash flows.E.The money to which an amount invested will grow over time.
